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More Middle-Income Borrowers Seek Debt Help

More middle-income consumers are seeking help through formal debt-reduction plans, according to an Atlanta-based credit counseling outfit.

In 2007, the average income for clients entering debt-management plans through the agency, CredAbility, was $43,000, and their average credit-card debt was roughly $22,000, said Mark Cole, executive vice president.

Last year, though, their average income was $54,000, and their average credit card debt was $24,000, he said. (The median income in the United States is about $50,000, he noted.)

Mr. Cole said the housing debacle and continued high unemployment rates were probably behind the trend. Middle-income borrowers are more likely to own homes, but they are now unable to borrow against the equity of their houses, because home values have fallen and lending requirements have tightened. They must increasingly turn to credit cards for emergency spending, and so are running up debt on plastic.

And, although it might seem as though borrowers with higher incomes should find it easier to get out of debt, that’s not necessarily the case, he said. “Often, what we see is they are much slower to make lifestyle changes than blue-collar or lower-income people,” he said. They have become used to driving new cars and having the latest cellphone, so “there are appearances they want to keep up.”

The agency compiled the statistics as it enters its busy season. Typically, consumers begin flocking to debt-counseling centers in mid-January, when they start getting the statements showing their holiday credit-card spending. The agency and others like it negotiate lower interest rates with credit card companies, if the borrower agrees to make regular payments to pay off the debt — typically, over three to five years.

Were you shocked by your holiday credit-card statements? How are you planning to pay off the debt?

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